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$1 billion cap on ECBs for aviation sector

The Centre, on Thursday, said companies engaged in the aviation sector could raise working capital resources through the external commercial borrowings (ECBs) route to the tune of $1 billion, where the limit for individual airline companies would be $300 million.

Noting Finance Minister Pranab Mukherjee had promised in his budget speech that companies in the aviation sector would be allowed to avail themselves of ECBs for one year for working capital/refinancing of outstanding working capital rupee *****, a Finance Ministry statement said: “The ECB made under this provision would have a maximum ceiling of $1 billion for the entire civil aviation sector.”

“The limit for individual airline companies would be $300 million. This limit can be availed themselves of either in a lump sum or in tranches, depending on the utilisation of the limit during the one year when the facility is available,” the statement said. Till now, airlines were allowed to raise foreign capital only for import of capital equipment such as aircraft.

“Proposals of individual companies would be considered by the RBI under the approval route based on the parameters such as cash flows and the capacity of individual companies to repay these ***** from their foreign exchange earnings. To increase access to ECBs, the RBI would consider relaxation in the average maturity period for ECBs above $20 million from five to three years,” the statement added. The RBI is expected to notify within a week guidelines for the proposal, which was part of the budget 2012-13.